The House and Senate are in conference on a “China bill” with multiple names and many provisions about many other things. The two versions of the bill exceed 5000 pages combined. On genuinely relevant economic matters—intellectual property, supply chains, outbound investment, and semiconductors—the question is simple: Will Congress treat China as a predator? If not, it will have done the bidding of the business community, and even possibly of Beijing.

Our story begins in 2019 when Senators Schumer and Young
began bipartisan work on increasing research spending. Basic research is a
valuable function of government and would help in our competition with the PRC.
The initial bill was 79 pages long. At this point, we’d be better off just going
back to it.

Greater government investment in research calls for ensuring
China doesn’t grab the results. The money obviously isn’t supposed to help the
PRC advance technologically, but that’s what will happen if Beijing can freely
solicit participants in the programs and the participants can freely cooperate.
We’ve seen this many times, on large and small scales. Without research protections, Congress would
be unintentionally helping China.

Those protections require another 10 pages. It takes many more pages to address another vital issue: the connections between supply chains and outbound investment. Supply chains are introduced at multiple points in mildly contradictory fashion within the House and Senate bills, plus differences between the two. Supply chains are tied to outbound investment because the principal way to move a chain is investing elsewhere.

The US has for years had compelling reasons to be concerned about
chains running through the PRC. It’s hard to believe a pandemic killed one
million Americans yet the Trump administration took no binding steps to eliminate China from medical
chains. Then the Biden administration required 13 months merely to study the topic. Calls for additional reports are
(more) stalling by those who don’t want to act.

Congress should identify a handful of truly vital supply
chains, then bar Chinese entities by law from those chains. Compensation for
the American firms involved may make sense, but using incentives will fail.
American incentives will be outmatched wherever China chooses—Beijing is much
better at market
intervention than Washington is. Too many chains means, at worst, the
government distorting markets for little reason and, at best, dangerously slow
progress.

Pharmaceuticals illustrate the urgency. The PRC dominates
important parts of the US market, such as for antibiotics. China also leads the world in
production of chemicals that make up key starting materials and intermediaries
for drugs. Often wrongly touted as an alternative, India depends on China. Every time the US chooses yet
another review, it leaves ordinary Americans subject to blackmail by Xi
Jinping. In 2022, does anyone still think that can’t happen?

If legislation connects outbound investment to supply
chains, it should follow the same principle: no investing to support vital
chains in the PRC, future or current. Don’t start with dozens of
industries, start with a small yard and a towering fence. If outbound
investment is considered separately, the ban should switch to advanced
technology. It makes little sense to protect technology developed here yet let American money finance
technology development in China.

The main political event in conference is semiconductor production.
There’s a debate over opening the doors to industrial policy, but the China
part is easier. First, if companies do receive taxpayer funds, they shouldn’t
then be able to invest more in the PRC. As with research, US
money shouldn’t make it easier for China to progress in chips.

Second is more supply chains. Expanding manufacturing has
major benefits but supply security may not be one. Semiconductor manufacturing
requires material and equipment. From where? Can these just be cut off in a
crisis, leaving us where we are now, minus $52 billion? 2030: Huge US chip
plants, lying idle. Finally, the PRC is competitive in end-stage assembly, testing, and
packaging. Firms should not be able to take subsidies, then use Chinese
contractors.

If Congress doesn’t block research organizations and the semiconductor industry from sharing benefits with China, it’s engaging in handouts that will help the Communist Party. If Congress doesn’t put an end to years of US government stalling on key supply chains, it’s complicit in leaving Americans exposed in the next crisis. Then this won’t be a China bill, it will be an abysmal failure.

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